Florida is making big promises on property insurance it probably can’t keep and Floridians will end up paying for it when the big storm hits.

Florida’s state-run market relies on the trinity of market “stabilizers” known as Citizens, the CAT Fund and FIGA. Each of these entities comes from the same creator: the state of Florida. This means that should something go awry with one or all, you are on the hook as a taxpayer. If this sounds like a major gamble, it is. 

The facts are unchanging: Florida has more coastal risk than all other states from Texas to the Carolinas combined. We can’t move Florida, can’t control the weather, and apparently, can’t control the market to make it viable. Something different needs to be done and it needs to be done soon.

Since Hurricane Andrew hit our state in 1992, Floridians have struggled with maintaining a vibrant private homeowner’s insurance market. Now, 20 years later, we are further behind than ever, and unlike the years leading up to Andrew, only two of the state’s top 20 private carriers have an A rating with A.M. Best.

In fact, the insurance company with the largest number of policyholders -- almost 1.5 million -- is the government-run entity: Citizens Property Insurance. And if you own a car, run a business, or even operate a non-profit, you face the risk of being taxed by Citizens.

Citizens is the most vulnerable of the three pillars of Florida’s fragile property insurance market. With more than 1.4 million policies covering more than $500 billion in risk, it is a far cry from being the state’s insurer of last resort. Quite the contrary. Not only is Citizens the largest carrier in Florida, it is the ninth-largest homeowner’s insurance company in the country. Even as large as it is, Citizens only insures 19 percent of the homes in Florida.

For many coastal properties, the premiums, excluding sinkhole coverage, should be 56 percent higher to match the risk.  Since 2007, Citizens has collected $206 million in sinkhole premiums and paid almost $1.2 billion in losses.  And sinkhole coverage, which was made an optional coverage last year, should cost 463 percent more, based on the huge increase in claims.

What happens when Citizens doesn’t have enough money to pay its claims? Well, take a look at your home, auto, business or non-profit insurance policy and you will see a 1 percent emergency assessment for the hurricanes that hit our state in 2004 and 2005. Citizens can levy three levels of assessments to meet its financial obligations when a big storm hits.

The first assessed tax, the Citizens Policyholder Surcharge, is only collected from Citizens policyholders and may be as much as 45 percent of their annual premium. So if you’re insured by Citizens, look at your premium and add 45 percent to see your maximum obligation under the worst-case scenario. This surcharge applies for one year. If it doesn’t cover the shortfall, the state has another option.

The second tax, called the Regular Assessment, would charge a 2 percent assessment of premium on non-Citizens property-and-casualty policyholders in Florida, including car and business policies. This rate was reduced from a maximum of 18 percent due to legislation passed in 2012, made possible because of the cash balance of Citizens.

However, the cash balance would not be there had a storm struck Florida in the last six years, or had we bought reinsurance like the private sector is required to do. Had Citizens bought comparable reinsurance in 2011, the cost would have exceeded $1.2 billion. So if you multiply $1.2 billion by six years, you have a negative cash balance of over a billion dollars -- without a storm.

Finally, there is the emergency assessment, which would be triggered if the first two assessments didn’t fill Citizens’ shortfall. This assessment would range between 10 percent and 30 percent for Citizens’ and non-Citizens’ policyholders. So again, even if you don’t have a Citizens policy but own a car, have a private homeowner’s insurance policy, or run a small business, you could be on the hook for Citizens’ claims.

Based on current figures, a storm or series of storms costing $13 billion to Citizens would trigger the assessments, making Floridians pay more when they are struggling to pay their hurricane deductibles.

Tack on the maximum assessments of FIGA and the CAT fund, which we’ll discuss here Monday and Tuesday, and you could have a total Citizens policy surcharge of more than 83 percent the year after a hurricane hits.

And for those fortunate enough not to have a Citizens policy, but insure a home, car or business, their hurricane tax could be 40 percent for each policy.

Things have got to change.

Rep. Bryan Nelson and Sen. Garrett Richter chair the state banking and insurance committees in their respective chambers.

For more information: click here for the website of Citizens Property Insurance, here for information about pays-claiming resources, here for information about the assessments that can be levied and here for information on rate filings.

Editor’s note: The second and third installments of the chairmens' look at Florida’s insurance market will appear Monday and Tuesday on Florida Voices.